Every marketing channel that a business uses should contribute to the overall profitability of the organisation. Whether directly by offering an individual positive ROI, or by fostering an improvement in the overall ROI achieved by that business. An over simplification would be to divide the digital channels into two main areas:
Awareness channels like display advertising serve the purpose of establishing a need within the audience and creating awareness of an answer to that need. Response channels like search or affiliate marketing capitalise on that awareness and exposure to increase the propensity of a user to buy. You can be successful with one or the other, but you can be more successful with both.
Proper attribution data is enormously helpful in judging the value of each channel and establishing the overall ROI of Digital Marketing as a whole, and informs you about the value of each channel and gives steer on where you should be spending your marketing budgets.
The most important thing any business can know is how much each customer is worth to them in terms of lifetime profit. by combining this data point with the usage metrics of a website, it becomes possible to determine what the acceptable cost per acquisition is.
Let’s say that the average margin on sales from a user to the website is £10, and you need to deliver an ROI of 10, then cost per acquisition of that customer needs to be £1. With a conversion rate of 5% from the website, you need 20 visitors to get one sale, which means that your average cost per visitor needs to be no more than £0.05 to meet your business objective of a £1 CPS.
Of course, when you take a holistic or cross channel approach to digital marketing through an attribution model, it is possible to assign different acquisition costs per channel. Fixed CPA channels such as affiliate can be used to reduce the overall CPA to fund greater investment in other areas such as display that would have a relatively high direct CPA if it was treated independently.
SEO typically fits into the overall digital mix in a fairly awkward manner. While most marketing media spend is based on the volume of media purchased with fees based on spend, SEO is often charged as a fixed cost per hour, and the volume of traffic over the course of a campaign should be considered cumulatively, rather than on a month by month basis.
Going back to the model above, where there is a £10 margin and a target ROI of 10 with a 5% conversion rate. If your SEO costs are set at £5,000 per month, then your campaign would need to deliver 100,000 visitors per month in order to generate the right ROI to match your needs. Most websites for established companies will already have a certain level of traffic to them. This means that SEO needs to deliver additional traffic.
Savvy marketing managers realise that the value of traffic to competitors is much the same as to their own business. So if traffic is worth £5,000 to you, then it is also worth £5,000 to your competitor – maybe more if they have a better conversion rate.
With SEO, you typically get what you pay for. If you are paying £500 per month for SEO in a competitive field where your competitors are paying £5000, then you will not be getting the same amount of time spent on activity. Assuming a similar hourly rate for each campaign, then you would only be getting one hour from your SEO agency compared to 10 hours for your competitor. This might mean that your consultant does not have time to review new opportunities within the market through the analysis of your traffic stats, or to provide strategic direction around how other channels can be leveraged through the SEO campaign.
If your SEO consultant has the time to spend reviewing campaign activity, they will be able to identify the most profitable niches within your existing traffic and spend more time targeting them.
The difference between a £500 SEO campaign and a £5,000 SEO campaign is likely to come down to the intelligence that can be assigned to it. With time available for analysis rather than action, the action can be more targeted, more efficient, and ultimately more effective.
The real cost of cheap SEO is one of opportunity.